Free TV and Video Websites such as Hulu, Youtube etc. are gaining popularity daily, at the expense of peer-to-peer (P2P) software who’s useage is slowing. So says a report by network-management systems vendor Sandvine.

Legally Free websites account for around 27% of the webs worldwide traffic, which is up from 13% in 2008. On the flip side, P2P file sharing represented 20% of all usage on the 2009 survey of 20 Internet service providers worldwide, compared with 32% in 2008.

Even though the amount of traffic consumed by file sharing apps is growing on an absolute basis, tv and video on demand services are growing more quickly, Sandvine CEO Dave Caputo said.

“Peer-to-peer is yesterday’s Internet story,” Caputo said. “Every category is growing in aggregate bandwidth, but bandwidth as a percentage is undergoing a massive shift to video.”

Sandvine’s 2009 Internet traffic trends report is based on data from more than 20 cable, DSL and fiber-to-the-home service provider networks representing 24 million subscribers worldwide.

An Internet-usage survey Cisco Systems issued last week also found P2P traffic had declined from previous levels, although it pegged peer-to-peer at 38%.

According to the Sandvine report, the mean average usage per subscriber is around 8 Gigabytes per month, while the median is about 3 Gbytes per month. The top 1% of Internet users accounts for nearly 25% of consumption, a cohort that uses 200 times the data per month as the average user.

The Internet’s peak-usage window shrank by two hours, from 6-11 p.m. in 2008 to 7-10 p.m. in 2009, in Sandvine’s analysis. During that “primetime” period, the usage profile among all users was roughly equivalent, whereas the heaviest users (sometimes called “bandwidth hogs”) use their connections 24 hours per day. “From 7 to 10 p.m., we’re all consumption kings,” Caputo said.

Given the 7-10 p.m. usage peak, Caputo noted, service providers have a strong incentive to try to encourage the use of non-real-time application at other times. “If you could shift some of that usage to the other 21 hours everybody would win,” he said.

The data for Sandvine’s report was gathered between Sept. 1-22 and captured the bits-per-second, per protocol and the number of active hosts per protocol on the network. The data does not include any subscriber-specific information, such as IP addresses.

Of course, if the currently free websites go down the pay to view route then peer-to-peer will come back with a vengeance. The networks may not like the word free, but its the only way to kill off piracy.

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